Which of the following statements are not true for the sole traders? I. They are not generally a reporting entity (an entity that must produce GPFR)II. They are single owner businessIII. The sole trader entities pay tax.IV. They are separate legal entities.V. They are relatively simple and cheap to set up.

Question

BlackTom AI · Accepted Answer

First, let's restate the question and the answer choices to ensure clarity about what's being evaluated.
Question: Which of the following statements are not true for the sole traders?
Options:
a. III and IV
b. I, II and IV
c. I and III
d. I, III and IV

Now, examine each option in turn and assess each listed statement against common characteristics of a sole trader.
Option a: III and IV
- Statement III (The sole trader entities pay tax): In many tax systems, a sole trader pays income tax on profits as an individual, so this statement is generally true rather than not true. Therefore, including III in an option that asserts not-true would be inaccurate.
- Statement IV (They are separate legal entities): This is typically false for sole traders, since the business and the owner are not legally separate; the owner is personally liable. However, because the option includes III as a not-true item, the overall claim that both III and IV are not true is already inconsistent with the common truth that III is true. Hence option a is not a correct grouping of not-true statements.
Option b: I, II and IV
- Statement I (They are not generally a reporting entity): In many jurisdictions, sole traders are not reporting entities under general-purpose financial reporting (GPFR) frameworks; they often rely on tax reporting rather than GPFR. This makes I typically true, not not-true.
- Statement II (They are single owner business): This is a defining feature of a sole trader and is true, so including II in a not-true set is incorrect.
- Statement IV (They are separate legal entities): As noted, sole traders usually are not separate legal entities, so IV is not true. But since the option mixes several truths and a falsehood, it does not cleanly identify only not-true statements. Thus option b is not correct as a grouping of not-true statements.
Option c: I and III
- Statement I: Not generally a reporting entity — typically true as explained above, so calling it not true would be incorrect.
- Statement III: They pay tax — generally true for sole traders, as they pay income tax on profits. Calling it not true would be incorrect.
Therefore, option c incorrectly labels both I and III as not-true.
Option d: I, III and IV
- Statement I: Not generally a reporting entity — usually true.
- Statement III: They pay tax — usually true.
- Statement IV: They are separate legal entities — usually false for sole traders.
In this option, two statements (I and III) are true in standard understanding, while IV is false. Labeling a mix of true and false statements as "not true" for all three is inconsistent with typical definitions.

Summary of what this analysis shows:
- I is generally true (not a reporting entity) and is not correctly categorized as not true.
- II is true (single owner business) and cannot be grouped as not true.
- III is generally true (they pay tax) and should not be listed as not true.
- IV is generally false (not a separate legal entity), so it is the only one that could be considered not true.
Given these nuances, none of the options cleanly isolate only the not-true statements in a way that matches standard definitions; each option mixes true and not-true elements, leading to a confusion of which grouping accurately represents the not-true statements. The presence of a true statement in every option signals a mismatch between the claimed not-true set and the usual characteristics of sole traders.

MCD2150 - T2 - 2025 Week 7 Workshop Quiz

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